Pick One: Commodity, Luxury, or Dead – The Future Of Product Positioning

The other day, I was looking to buy a jump rope I could travel with. After spending (wasting?) about 30 minutes going through jump ropes on Amazon caused by searching for “best MMA jump rope”, I paused to ask a highly relevant question: what in the world was wrong with me? Why did I need “the best” jump rope?  The previous jump rope I owned came from who knows where and served me fine for a long, long time. The experience felt like living my own version of Aziz Ansari’s piece about trying to find the best toothbrush.

Last week, I had a great lunch conversation with my friend Lexi Lewtan (currently building AngelList’s A-List job platform) about something similar she was noticing in the recruiting industry. Companies all wanted to recruit “the best” iOS engineer or designer for their company even though that bar is subjective based on what that company is building. No one, not even early stage startups, wanted to settle for hiring an average engineer, even if that meant huge cost savings and would get the job done perfectly well.

We’re taught in economics, entrepreneurship, and statistics classes to assume that most things lie on a normally distributed curve. This is especially true about demand – at some prices, I’d like to buy a “widget” while at higher prices, I wouldn’t.

Image Credit: Alex Danco
Image Credit: Alex Danco

Anecdotally, it seems that this assumption is falling apart. Alex Danco wrote a great post about this called Taylor Swift, iOS, and the Access Economy: Why the Normal Distribution is Vanishing so I won’t rehash that here but definitely go give it a read. Seriously, I’ll wait.

Essentially, the post boils down to the world moving from one of scarcity to one of abundance and that leading to a breakdown of the normal distribution curve:

Image Credit: Alex Danco
Image Credit: Alex Danco

To build on Alex’s great post, I think we’re moving to an even greater dichotomy. We’re going to live in a world where companies AND people are either luxuries OR commodities. This trend is showing up in industries as varied as cosmetics, labor, food, and much more. Let’s start with some definitions; what’s the difference between a commodity or a luxury in this context?

Commodity: A product or service for which I’m brand agnostic and highly price sensitive, usually because I believe there is no major difference in quality between brands OR it’s just something I don’t really care about. Examples (for me): gas stations, drug stores, bottled water, socks, paper towels…the list goes on.

Luxury/Premium/Prestige: These are products or services for which I’m highly brand/review sensitive and minimally price sensitive. Things in this category for me include coffee, beer, shoes, cell phone, computer, chocolate, and many, many more. The luxury/premium/prestige category is the one where you would search for “the best” on Google or Amazon.

One key thing to remember is that the determination of a commodity or a luxury is an individual thing – for example, some people think all beer tastes the same and treat it as a commodity. I think differently and am willing to pay a huge premium for beer that I think tastes better, uses more valuable/rare ingredients, and has a better story behind its creation.

The easiest way to test whether something is a luxury or commodity for you is to imagine the price of product X increased by 10%. Would you still buy it or would you switch brands? For example, for most people, if a cup of Starbucks coffee increased from $2.50 to $2.75, they wouldn’t think twice about continuing to buy Starbucks. Similarly, if the price of a 15 inch Macbook Pro went up from $1,999 to $2,299, most Macbook Pro customers would still buy it (although probably with some complaining).

Let’s look at how the luxury vs commodity trend is affecting three very different industries:

Cosmetics

I’ve been spending much of my time studying the cosmetics industry because of my work at The Estee Lauder Companies. Since my role is to look externally, I’ve been watching how companies position themselves and how they’re adapting to this new luxury-commodity dichotomy.

One of the biggest moves last year in cosmetics was P&G divesting a huge chunk of their beauty business in a $12.5 billion sale to Coty. One of the striking things about that transaction is that P&G chose to hang on to its most prestige skincare brand – SKII. In another example, Unilever, a huge personal care company that traditionally stays in the mass-market world with brands like Axe, Dove, and Degree, bought 4 prestige beauty companies in 2015 and they’re on track to acquire more in the future.

“Prestige is growing much faster than the mass market”

-Alan Jope, President of Personal Care, Unilever

For beauty brands, there isn’t much room left in the middle – either you’re making commodities that are competing on price (in which case, your gameplan should be to cut costs as much as humanly possible and sell at grocery stores and drug stores) or you’re competing on uniqueness and luxury, in which case you need some product, marketing, or service elements that stands out.

Labor

If you think about labor in a “prestige” vs “mass-market” manner, you see a similar thing happening. Companies look to hire world class full-time employees for a select few key positions and for everyone else, they’re OK working with outside firms or freelancers. This makes sense from their perspective: why invest additional overhead for average talent when you can replace it easily with the next person who walks in the door?

This trend is part of the reason we’ve seen marketplaces for unskilled labor pop up everywhere over the past few years – not just Uber, but also Fancy Hands, Handy, Wonder, and much more. The people working for these companies are all contractors, which is a much cheaper arrangement for companies than hiring full-time, allows flexibility for workers, and allows companies to adapt dynamically to demand in the marketplace (Uber’s surge pricing is the best known example of this).

On the other side of the unskilled labor marketplaces, highly skilled individuals in certain industries have seen their salaries climb higher and higher as firms bid for their talent. This can be seen on a wide scale by looking at software developer salaries or the long-term rise in CEO pay at Fortune 500 companies. As much as it would be fun to complain that these pay issues are all about corporate greed (which is certainly a factor for the CEO pay issue), at the end of the day, it’s really about companies bidding against each other for talent that they want to acquire or keep at all costs – aka the luxury talent.

Food & Beverage

Believe it or not, there was a time when coffee was a commodity item. For those of us who’ve grown up in the era of the $5+ latte, the commodity coffee era is a difficult world to imagine. I assure you, however, a world in which coffee consisted of hardly drinkable sludge that cost $0.50 was a very real place.

The late 80s and early 90s featured the rise of a company called Starbucks. You may have heard of them. The key distinctive trait of Starbucks was taking a commodity item that no one thought much about and elevating it to a level no other coffee retailer had imagined or done on such a large scale.

What does the word elevating mean? In this context, elevating coffee meant Starbucks started with higher quality beans than any of their existing competitors (luxury), roasted them with a more precise science than their competitors (luxury), integrated the story of Italy, espresso bars, and the Third Place (luxury), and included an ethical component (luxury). Compare that to a gas station that would pour some black sludge in a styrofoam cup and sell it to you for $0.50 (commodity). All of these elements factor into giving Starbucks the cache to sell a commodity product as an affordable luxury for almost 10x what their competitors were selling at. Howard Shultz (the man behind Starbucks) tells the full story behind the commodity to luxury rise in detail in his book Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time.

Today, the rest of the food & beverage industry is doing its best to try to break out of the world of commodity items. Whether they do or not remains to be seen but the tide has turned in luxury’s favor as more and more people are paying attention to the ingredients in their food. This creates an opportunity for brands to elevate (there’s that word again) healthy ingredients, the lack of preservatives, ethical sourcing, freshness, or dozens of other desirable food characteristics.

Commodity vs Luxury: The Way Forward

The main, short-term outcome of this commodity vs luxury transition is that companies are going to be forced to make decisions about how to invest in their futures. My guess is that more companies are going to invest in building brands that are luxuries. Why? Because a luxury’s key differentiator is uniqueness – which could come from a unique ingredient, a novel process, or a fascinating background story – any and all of which can be sustainable competitive advantages.

Building a commodity business seems to me as an outsider to be a lot more difficult. Commodity businesses would be competing mainly on price which makes it easy to imagine commodity businesses becoming a race to the bottom with margins getting slimmer and slimmer until there are no profits to be made. Commodity businesses survive on high volumes and while of course there will always be a (huge) market for them, I think we’re moving to a world where people will buy a higher percentage of products at a premium that last longer, work better, and are more unique – which by necessity means purchase volume will go down.  This trend could also be tied to growing income inequality – fewer people in the middle class – but that requires more research to figure out.

Something I haven’t mentioned anywhere else in this post but runs in the background of all these trends is technology. Technology, especially data but also includes manufacturing tech like 3D printing, is giving companies the ability to create customized and personalized products in almost any industry – which is certainly one way to create a premium product. When a company has created a customized product for you and owns the data to continue improving that product, it becomes a premium experience with a competitive advantage. That’s a tough combination to beat.

Thanks to Lexi Lewtan, Brett Martin, and Josh Dodds for their feedback on early versions of this blog post.

Staying In Shape While Traveling

Staying in shape, mentally and physically, is obviously important to overall well-being. Personally, I find my mind is sharper and more importantly, I’m a much happier person when I take care of myself physically.

Since last April, I’ve been traveling a ton for my consulting work, typically somewhere between 2-3 weeks every month. Traveling is something I love so I can’t complain too much about that buuuut it certainly makes staying in shape difficult. Before this travel madness started, I had a regular gym routine (3-4 days of lifting weights, 2-3 days of cardio) but that’s difficult to keep up when you’re in a different place almost every week. 

Over the past few months, I’ve learned a lot about staying in shape while traveling. As is usually the case with me, most of these lessons were learned the hard way:

Skip the hotel breakfast

Free hotel breakfasts are almost always god-awful, especially if you’re staying at a road warrior hotel, like Homewood Suites or Residence Inn. Tell me if this sounds familiar: Soggy, somewhat rubbery scrambled eggs, breakfast potatoes that taste like they’ve been out for weeks, and some strange processed meat as a side.

Oh, I forgot about the waffle maker.

Do yourself a favor and skip most of that. Maybe grab some eggs and toast if you’re really hungry. But probably the safest items to consume in a hotel breakfast are the coffee, tea, and juice. With all the other stuff, you’re going to be consuming amounts of sodium and sugar that’ll leave you feeling exhausted for the rest of the day.

So if you’re not going to eat breakfast at the hotel, what can you eat?

Find a grocery store

Grocery stores are amazing places. Even in the middle of nowhere, you can find a grocery store that sells healthy food. My advice is to go to a grocery store the day you arrive and pick up a few things. Obviously food choices are somewhat dependent on whether your hotel room has a fridge/microwave. Here’s what I typically buy, assuming there’s a fridge:

  • A few apples
  • Some nutrition bars (I like Nature Valley Oat & Honey bars)
  • Greek yogurt

That sounds like a solid breakfast to me.



Take advantage of free exercise

This is a concept I try to use all the time, not just when I’m traveling but it’s even more important on the road. The idea is this: if you have to do something, for example, go from the ground floor of the hotel to the 4th floor, there are two options available to you:

Option 1: Take the elevator

Option 2: Walk up the stairs

Even though option 2 is more energy intensive, it’ll take you to the same place as the elevator, you’ll burn a few calories, and you’ll probably save yourself the stress of waiting for an elevator that takes forever and the awkwardness of being in an elevator. Related question: aren’t elevators just the most awkward places ever?

Another great form of free exercise if you’re in a city is just walking to meetings instead of taking an Uber or cab.

Get good at hotel room workouts

hotel gym fail
Typical hotel gym

Let’s face it: hotel gyms leave a lot to be desired. That said, there are some great workouts which don’t require any equipment and can be done in your hotel room (like this and this). Start doing them regularly when you’re on the road and add your own variations to keep it interesting. The easiest exercises to do in a hotel room, no matter what size, are:

  • Pushups (all kinds)
  • Bodyweight squats
  • Lunges
  • All sorts of ab exercises
  • Stretching

Take advantage of real gyms when you’re home

On a related note, if you’re on the road regularly, it’s easy to get into a routine of laying on your couch and watching Netflix when you’re home. I love Netflix as much as the next person but make sure you squeeze in some “real gym” time when you’re home. A real gym is a place that has barbells, plates, machines, and space.

If I get home before 8pm from a trip, I try to squeeze in a short, gym session the same evening.

Free meals aren’t really free

One great thing about work travel is being able to expense your meals. That’s amazing right?! Well, yes and no.

The good news is that you can take advantage of being in a new place and try types of cuisine and restaurants you typically wouldn’t go to. In some industries (like the one I’m working in now), work travel can also entail fancy dinners which gives you an opportunity to try more upscale restaurants you probably wouldn’t choose on your own.

The downside? Well, all those meals might be covered by your company/client but that doesn’t mean the calories don’t count. Just because dessert is covered doesn’t mean you should get dessert.

Remember the “freshman 15” from college? (I do…) You see a similar effect among new consultants for a very similar reason. I remember when I first started college, the “coolest” thing was being able to drink soda with every meal. A few months later, despite being a college athlete, I had gained 15 pounds and it was pretty obvious that the soda needed to go. Don’t make the same mistake as 18-year-old Neil.: try to eat the same way on the road as you’d eat at home.

But that doesn’t mean you shouldn’t enjoy the perks of going to fancy restaurants! Just be smart about it.

Get sleep

For someone who travels a lot, I still haven’t learned how to properly sleep in hotel rooms. Almost without fail, I find it difficult to fall asleep the first night I’m in a new hotel room. Knowing that allows me to plan for it. Most nights I sleep for about 7 hours so on my first night in a new room, I’ll try to budget 8-9 hours for sleep, which gives me some time to toss and turn and still get a normal amount of sleep. It doesn’t always work but it helps. 

Skimping on sleep is a great way to get sick while traveling – probably the worst possible combination.

Avoid alcohol, especially late at night

Related to the above, drinking alcohol affects your quality of sleep and can also contribute to getting sick. If your travel requires you to fly, keep in mind that planes dehydrate you so drinking alcohol before, during, or immediately after a flight can be rough on your system (and on your skin). If you do choose to drink, just try to balance each drink with a glass of water and you should be able to avoid dehydration.

And yes, I learned this lesson in the worst possible way by going out in SF the night before a 6:30am flight (what the hell was I thinking?). Next time we’re in the same city, ask me for the story.

Buy a StandStand

If you haven’t heard of StandStand before, you need to check it out. Basically it’s a portable standing desk made of a three interlocking pieces of wood. Great product that travels nicely in a laptop bag.

Especially after sitting for a while in a plane/train, working on a standing desk instead of sitting down feels amazing. Trust me.

 

Traveling for work can sometimes (or usually) be rough but being smart about how you travel, eat, and move while on the road makes all the difference between a miserable trip and a productive one. I’ve been on both sides of the productive/miserable spectrum and believe me when I say the productive side is a lot more fun. Let me know if you have any other suggestions for staying in shape while traveling – I’d love to try it out. 

How To Get Up To Speed In Any Industry…Quickly

Getting started in a new industry can be super challenging but in today’s world of shorter stints with companies, quickly building working knowledge of a new industry is an extremely valuable and essential skill. Becoming fluent in your industry quickly means you start providing value sooner to your team, customers, employers, investors – everyone.

Back in the day (2012), I showed up to a lunch meeting in Pittsburgh with Adam Paulisick unprepared to answer his questions about the economics of college admissions, the industry I was running a company in at the time. He gave me some advice that stuck with me ever since: To win, you HAVE to know more about your industry than anyone else – there are no excuses.

Since that embarrassing episode, I’ve tried to apply Adam’s advice to everything I’ve done and developed a step by step process that makes the challenging process of getting up to speed in a new industry a bit more methodical:

Step 1: Read as much as you can about the market 

There’s nothing to replace this step. Read EVERYTHING – articles, journals, books, forums, industry history, even tweets. Don’t judge anything you read yet – at this point in the process, you don’t know anything. If there’s some kind of overview book, start with that – if not, start with articles because they’re usually written in layman’s terms. You should absolutely be taking notes – the key here is to start building a knowledge base. Allow yourself to go down the rabbit hole.

One last thing on this topic: give yourself the time you need to read about the industry. Study for this like you studied for the SAT and make sure you block the time off on your calendar. This is just as important as any meeting.

Step 2: Find people who know a lot about the market and spend time with them 

Talking to knowledgeable people and asking questions is something that should be done mostly in parallel with reading but make sure you’ve at least read a little bit first so you can ask relevant questions. Don’t worry about forming opinions yet – just keep building knowledge. Asking someone for their time initially feels scary (why would they want to talk to me?) but you’ll find that smart people: a) generally want to be helpful and b) are generous with their time when they sense you’re genuinely curious about their life’s work.

A simple hack here that’s been magical for me: Ask each person you talk to in the industry for one other person they recommend you talk to. Even better, ask if they can introduce you. Very quickly, you’ll have a network of really smart people who genuinely want to help you learn. #winning

Step 3: Form opinions and test them 

The first two steps in this process are fairly straightforward – they require work but your ego isn’t at stake. The third step is what will require some courage. To figure out if your mental “picture” of your new industry is correct, you’ll have to form some opinions AND get a reaction on those opinions from knowledgeable people. Without getting a reaction on your opinions, you’ll simply be forming a (likely) incomplete/incorrect mental map of the industry. Feedback is what allows you to correct, iterate, and improve on your mental map to create something resembling reality.

One of the most amazing things about the discovery process is that this is the stage where tons of ingenuity comes from, likely because at this stage, you’re reasoning from first principles (as opposed to ingrained dogma). Cherish this point of the process even though it’s scary sometimes. The worst-case scenario is that you say something stupid – no big deal.

Step 4: Repeat, repeat, repeat!

This process isn’t something that should only be done when you first start working in a new industry. It should be done constantly so that you continually grow your knowledge base and keep your mental map up to date. The ultimate goal is to have what athletes refer to as “fingertip feel” of your industry.

Bonus Tip: Your ego is your worst enemy 

All of the suggestions above require leaving your ego at home. If you can’t do that, all the feedback in the world won’t improve your mental map of any industry. Remember, feedback isn’t an insult – it’s a gift and a huge competitive advantage. Allow yourself to accept feedback and you’ll find that you’ve learned more about your industry in 6 months than most people learn in 10 years.

Sales Prep: How Do You Get In The Mindset To Sell?

On the surface of it, selling something is pretty weird. You’re basically using words, Jedi mind tricks, and (occasionally twisted) logic to convince someone that they should do something, which usually consists of them giving you money.

Oh and if you’re about to skip this post because you’re not a “salesperson”, let me ask you something: have you ever had a job interview? Have you ever pitched an idea? Have you ever asked your teacher for a deadline extension? Yea…you’re a salesperson. Don’t be ashamed, we’re all salespeople. Own it.

So if we absolutely have to do the uncomfortable act of selling something, we might as well do a good job right? The art of selling is first and foremost about confidence. If you don’t believe in what you’re selling, you can be damn sure no one else will either. Salespeople require a similar level of unshakeable confidence as athletes do and just like athletes, salespeople tend to have a “sales prep routine” to get into the right sales mindset. Here’s one that works for me:

Step 1: Watch these 2 videos (language NSFW) featuring Vin Diesel and Ben Affleck from the movie Boiler Room. Awesome demonstrations of sales techniques in here too:

Best quote from these videos: “There is no such thing as a no sales call. A sale is made on every call you make. Either you sell the client some stock or he sells you on a reason he can’t. Either way a sale is made”. Word.

Step 2: Review your plan – why should this person give you what you want?

I’m not a big believer in sales scripts. In my opinion, scripts are a great way to make yourself seem robotic and unlikeable (unless you know the script really, really well – so well that it’s second nature and you don’t have to think about it). That said, it’s still important to have a gameplan in place – where do you want the conversation to go, how you want it to flow, and what you want them to do. Most importantly, you have to be able to answer the question: why should the other person do what you want them to do?

Step 3: Review objections – why would someone say no to what you’re selling?

Inevitably when selling, someone is going to say no to you. The key is how you handle their objections. Obviously you need to know what the objection is in order to respond to it and improve in the future, so make sure you make the effort to find out. It amazes me how many people take “no” at face value in the sales process and completely miss the opportunity to iterate on their product/pitch. By understanding objections, at the very least you know what you can improve for next time. And yes, you should be writing these objections down.

Step 4: Watch Alec Baldwin motivate you to sell in Glengarry Glen Ross (language NSFW)

Remember: Always be closing!

On a more serious note though, the AIDA (Attention, Interest, Decision, Action) framework that Baldwin talks about is really, really effective. Learn it and use it.

Step 5: Go make the sale

You got this. Have fun with it – what’s the worst that’s gonna happen? They say no? Their loss.

Step 6: Drink some coffee (because coffee’s for closers only)

If you want to go deeper into learning sales skills, I highly, highly recommend buying Jeffrey Gitomer’s Sales Bible book and getting tons of real life practice. There aren’t any shortcuts to getting good at this stuff. It just takes confidence and hard work.

How To Not Suck At Customer Development

Over the past ~2 years, I’ve been working almost exclusively on customer development and growth at Mom Trusted, with my consulting clients, and at Workhorse. In 2015 alone, I’ve had upwards of 100 customer development conversations. Along the way, I’ve learned a few lessons, some from personal mistakes and a few from observing others.

customer development

                                  All image credit goes to Scott Adams

 

Here are some of the pitfalls to avoid if you’re trying to learn something about your potential customers, instead of just paying lip service to the “customer development” buzzword.

Being Scared To Talk To Customers

This is, by far, the most unforgivable customer development sin. It’s impossible to get an accurate sense of reality without understanding, in extreme detail, the motivations and fears of your target customer. This fear of customer interaction lies in the fact that most founders (I’ve fallen into this trap in the past) have a mental picture of what their product/experience looks like and don’t want to burst that bubble. Maybe they also have a mental picture of what success will look like after they sell their company to Yahoo! for $100 million and don’t want to ruin that fantasy world by finding out that customers don’t want what they’re selling. Everyone has their own reasons for being scared to put themselves out there but this is the most dangerous sin on this list.

Putting A Layer Between You And The Customer

This is one I’ll never understand. I’ve come across founders, that for whatever reason, put a layer (or two) between them and potential customers. I don’t know if this stems from shyness or bubble bursting syndrome or what, but the net effect is that these founders always hear what their customers want or are frustrated with from some third party source. This is a great way to get incomplete or even plain wrong information, since the people who make up the layers (presumably employees or contractors) will try to tell you what you want to hear.

By not hearing any feedback directly, it’s easy to delude yourself into thinking things should be a certain way with no real evidence. In contrast, some of the best founders – including Jeff Bezos (Amazon), Steve Jobs, (Apple), and Tony Hsieh (Zappos) – correspond with their customers directly on a regular basis, even after their companies became multi-billion dollar Goliaths. Sorry, 10 person startup founders – there’s no excuse for not talking to customers directly.

Not Empathizing With The Customer

Empathy is such an underrated part of customer development. The problem with purely asking questions and using the responses to build your model of the target customer is that sometimes people don’t always verbalize the underlying emotional need they’re trying to express. For example, the success of Facebook can be very much attributed to people’s loneliness and desire to stay connected. But very few people would ever say that they use Facebook because they’re lonely. They would say they want to “stay in touch with family and friends” or “share important life events with people close to them”.

Customer development is all about building a complete model of the target customer. To build that complete model, you absolutely need to know the following:

  • What gets them out of bed in the morning?
  • What do they care about?
  • Who is their customer?
  • How are they measuring success?
  • What are they motivated by?
  • What keeps them up at night?

Empathy isn’t really something you can fake. Customers can tell if you’re just phoning it in and don’t really care about solving their problem. Be genuine and you’ll be pleasantly surprised by what they share with you.

Not Even Knowing Who Your Customer Is

This sounds dumb – how can you not know who your customer is? It’s actually a really common issue for B2B startups at the earliest stages. For example, imagine you have a software tool to help salespeople. If you’re taking a top-down approach where you sell to the VP of Sales and sign an enterprise contract, then your customer is not the junior salesperson, it’s the VP of Sales. If you’re taking the bottom-up approach and getting individual salespeople to use your tool and then drive adoption through their organization, your customer is the junior salesperson. You can see the end result of these alternative approaches by looking at the difference in UX between Salesforce and a tool like DocSend. To me (not a VP of Sales), DocSend looks awesome. Salesforce, on the other hand, does not. I’m not the target customer though – with the success Salesforce has had, it’s pretty obvious that their target customer likes them a lot.

By properly defining the customer, you can start to get accurate answers to your customer development questions, which is the first step to building a product that solves a problem for someone.

Closing Thoughts

 

Every company, whether it’s a startup or a Fortune 500 corporation, is 100% dependent on its customer. Having a thorough understanding of a customer, their life, and their motivations is the only way to create something they actually want. Remember: while potential customers usually have a fixed need they want fulfilled, which can be physical (for example, hunger) or emotional (loneliness), the form of the solution may change over time. The only way you’ll be able to understand the need and the form of the solution is by truly empathizing with your customers’ pain. It’s a skill that takes practice but it starts with something super simple: Ask questions and actually listen to what your customers tell you!

Failure: The Secret To Becoming Mentally Tough

Michael Jordan on failure

I’ve been noodling on a theory for awhile related to mental toughness. The theory is this: There‘s a huge difference in mental strength between those who’ve been “failure-tested” and those who haven’t. Failure-tested is a bit of a vague term so let me explain what I mean before diving in further.

When I say failure-tested, I’m not just talking about someone who has started a company and failed. That’s just one example. It can also include people who’ve gone through devastating injuries or accidents, recovered from an addiction, gone through a divorce, or any number of tragedies. The key to being failure-tested is not the event that constitutes “failure”, but the effect the event has on personal identity.

For example, when a football player gets an ACL tear and has to sit out for 12 months, are they still a football player? Of course they are but 12 months of not doing what you think you were born to do can shatter personal identity. If someone’s personal identity revolves around a company they started and that company fails, their personal identity is destroyed. The same thing happens if they self-identify as a husband and their marriage dissolves. My hypothesis is that true failure (and the negative mental effects associated with it, like depression) only occurs when someone’s personal identity is destroyed.

I started thinking about this as I read Sam Sheridan’s excellent books on martial arts: A Fighter’s Heart and The Fighter’s Mind. Sam talks about how the best thing about MMA (mixed martial arts) is that it allows you to use whatever style you want, from muay thai, to kung fu, to Brazilian Jiu Jitsu, and see if you can make your opponent “submit” (AKA “tap” or quit). When someone submits in MMA, the fight is over. It’s great because it makes it more unlikely for serious injuries to occur (since you have the option of quitting) but to a fighter, the act of submitting means that your opponent has total power over you – they could kill you, if it were a street fight.

When someone is forced to submit during an actual MMA fight, it can shatter the fighter’s world view and make it nearly impossible to get back in the cage, which by definition, requires you to think you can win. Yet unlike boxing, most of the best MMA fighters aren’t undefeated, so how is that possible? The answer is that these top fighters can take the mental beatdown that comes with failure, pick themselves back up, and improve for next time. It’s more than simply getting back up – these fighters actually get better after these losses. The losses push them further for next time.

How does this all tie into someone being failure-tested? When someone has experienced the pain that comes with their personal identity being shattered and comes back from it to take another shot at life, they’ve been failure-tested. I’ve noticed this a ton in the startup world – founders who’ve failed and try again are often some of the most mentally tough people in the industry (and most of them have failed at some point). You may argue with his methods but Uber CEO Travis Kalanick is a great example of this. At one point before Uber, “Kalanick was filing for Chapter 11 bankruptcy and sleeping in his parents’ house”. Uber is not Kalanick’s first company and he has definitely been failure-tested, probably in more ways than we are even aware of.

An even better example than Kalanick: When Elon Musk was at Paypal, he couldn’t afford an apartment so he lived in the office and showered at the local YMCA. Unrelated tangent: I used to work out at that same YMCA when I lived in the Bay Area (not during the same time period obviously). The trials for Musk didn’t end there though. He later invested ~100% of his (now massive) net worth into Tesla and SpaceX. At one point, he had to borrow money from friends to pay rent, despite being mega-rich on paper because Tesla couldn’t make payroll unless he put in his last $3 million into the company. Talk about being failure-tested – his life could’ve been a rags-to-riches-to-rags story. Instead, he’s now one of the most accomplished human beings of all time.

It’s no coincidence that there’s a large number of successful people who went through rough childhoods. Those early experiences shaped the way they would respond to difficulty for their lives.

So how does all this apply to you? There’s a lot I could say about this but overall it all sums up to one thing: take risks and put yourself in a position where you’re testing yourself. This all depends on you but could include things like:

  • Run further than you’ve ever run before
  • Lift something heavier than you’ve ever lifted
  • Start a new hobby
  • Try a new sport
  • Ask out that girl or guy that you’ve been afraid to
  • Write something

Yes, trying something new and testing yourself is going to feel awful….at first. Pretty quickly though, you’ll get used to it. Being frustrated is a great sign that you’re out of your comfort zone and on your way to growth.

I think there’s a lot more to say about this topic in many different areas – especially hiring and personal relationships but I’ll save that for future posts. This is already too long (that’s what she said….).

Russell Wilson, Adversity, and Stoicism

“Why didn’t they run it from the 1 with Marshawn?”

It’s something nearly everyone has wondered aloud in the past few days. For those of you who’ve been living under a rock, here’s what happened: the Patriots had a monstrous comeback in the 4th quarter to go up by 4. The Seahawks then stormed down the field thanks to some crazy plays like this one. They were down 4, had the ball at the 1 yard line with 1 timeout, 26 seconds to go, and had the best running back in the league in their backfield. On the next play, they decided to pass, it was intercepted and that sealed the game. The Patriots won, Tom Brady/Bill Belichick get their 4th title, and the Seahawks are left wondering what happened.

For most of us, having anything like that happen, let alone on the world’s biggest stage, would be absolutely devastating. What shocked me the most since then, is Russell Wilson’s reaction. Here’s a quote from his press conference on Tuesday (less than 48 hours after the game was over):

“I always kind of write down stuff and I wrote down this, ‘Let’s keep the focus on the future, not what’s behind.’  I think that’s a really, really important thought in terms of staying positive.  What can I do for the next opportunity that I have?  What can I learn?  Good or bad — if we had won the Super Bowl or if we had lost in the fashion that we had.  I would still be thinking the same way and I think keeping that consistent approach to life in general and this is a lot bigger than obviously, losing the game is tough but any life circumstance — losing my dad.  What do I do next?  How can I learn from the lessons of losing him?  And obviously losing a game is completely different than losing a family member. Those are the type of things that I think about.  That’s how I try to prepare my mind for the next opportunity that I have — the next thing that I have in my life that comes up.”

That’s an incredible quote, especially given the circumstances. He doesn’t throw his coaches under the bus. He doesn’t blame anything on his receiver (even though analysts say the receiver deserved a lot of the blame on that play). He looks at what he can learn and how he can apply it to future situations. I don’t know about you but when the Packers lost to the Seahawks a couple weeks ago (a game I wasn’t playing in, in case you were wondering), it took me a good ten days to even want to think about football again. And I’m just a fan! Wilson is already looking at what he can learn, less than 48 hours after what will surely be one of the biggest missed opportunities of his career. His capacity to handle adversity and learn from it has just left me in awe since reading that quote yesterday.

Dealing with adversity is something I’ve been trying to work on over the past few months. Packers game aside, one thing that’s been helpful is Stoicism. There’s probably a super technical definition of Stoicism online somewhere but essentially what it teaches is that we can’t control external events or the results of our actions. We can only control the actions we make and our reactions to external events. What this philosophical belief system results in is doing the best you can and then letting the chips fall as they may. There’s a lot more to it but that’s the gist. It’s been amazing in delivering peace of mind so far but clearly, I have a long way to go in my understanding and practice of Stoicism.

I have no idea if Russell Wilson considers himself Stoic or not but he’s been doing a great job of demonstrating the ideals over the past few days. His post-game reaction has shown me how much further I have to go in my ability to handle the ups and downs of my life, which are quite honestly nothing compared to what an NFL quarterback faces. And in turn, the pressure an NFL QB faces is fun and games (literally) compared to what someone living in poverty or under the rule of ISIS would face every single day. It’s all about perspective.

By the way, if you want to read more about Stoicism, definitely check out Meditations by Marcus Aurelius. If you read that and enjoy it, then pick up Letters From A Stoic by Seneca and The Discourses by Epictetus. And in case you thought all Stoics are ancient, some modern stoics include Bill Clinton, Arianna Huffington, and Ryan Holiday.

Most Business Books Are Unnecessary

Most business books are unnecessary to read if you’re reading to learn something. When I say unnecessary, I don’t mean the information provided in them isn’t helpful. I mean that there’s nothing you can find in those books that couldn’t be learned from a couple of blog posts. I notice this more with newer books than older ones but that’s probably because the older books that have survived and are read today actually have some worthwhile ideas.

Most business books simply repeat ideas that have already been talked about 100 times elsewhere. Now that’s actually fine – IF the book expands on those ideas with longer anecdotes and examples OR it organizes the information in a way that makes it more accessible to the reader.

For example, Traction does a great job of organizing information in an accessible format. Everything contained in Traction can be found online from various sources. The real value of the book and having it available as a reference is that it pieces together information in a coherent format that saves you time and energy. Last time I checked on Amazon, Traction cost $10.64 for the hardcover edition. Would I pay $10.64 to have this set of resources on my desk any time I want? Hell yea – and it’s sitting on my desk right now.

Another example of a business book worth reading is Ben Horowitz’s The Hard Thing About Hard Things. Ben’s been in the trenches with a few companies and has some amazing stories to share – I can’t recommend this book enough if you’re a founder or have any thoughts of becoming a startup employee or founder someday. The book is about 300 pages long but when I finished, I found myself wishing it was longer because the examples and stories were so good.

Benedict Evans and Chris Dixon have some pretty entertaining tweets about business books and I think they’re spot on, Benedict’s quote in particular. Business books make “business people” (whatever that means) feel productive and good about their reading time. Kind of like most self-help books, they’re written in a way that makes sense and has you nodding your head until you actually think about the application and you realize that you just read a bunch of fluff.

Last week, I read Seth Godin’s Permission Marketing, which was written way back in 1999. It’s a smart book and was definitely revolutionary when it came out but probably 75% of it was unnecessary. The entire 200+ page book is about the concept of getting permission from consumers to market to them with the prime example being email newsletter signups. Solid concept but not nearly enough detailed examples to warrant 200 pages. I saw the same thing while reading The Lean Startup by Eric Ries. Another great concept but again, too much fluff.

While you shouldn’t categorically reject business books, be careful which ones you invest your time in. Often, you’re better off spending your time reading books about history, philosophy, psychology, or biographies if you’re reading to learn something. You’ll find that those are usually more relevant to solving your problems than business books are.

 

The 10 Most Influential Books I Read in 2014

In 2014, I made it a goal to re-dedicate myself to reading. I read a ton growing up but for the past 6-8 years, I probably read less than 10 books per year outside of class. The books I recommend below were all personally transformative for me in one way or another. As with any book, the influence the books below had on me was based on a combination of things including what was going on in my own personal and professional life as well as what was happening in the world at the time.

This is not a ranking list so the books are presented in no particular order.

Zen and The Art of Motorcycle Maintenance by Robert Pirsig

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I really, really wish I had read this book before starting my undergrad degree in engineering. Throughout college, I felt frustrated about the theoretical focus of engineering education. I fall more on the visual learner side of the spectrum so learning about chemical engineering was particularly difficult (it’s hard to picture molecular interactions). The times I felt most comfortable were when a previously discussed concept was physically shown in a lab class. As my friends from college are very much aware of, I was pretty outspoken about my frustration with the curriculum and the way engineering was being taught.

This book dives right into the engineering education issue and so much more. It’s told in a narrative format about a father-son, cross-country motorcycle journey that’s filled with flashbacks and self-discovery, but most importantly, goes into the philosophy of the relationship between art, science, and practical application. I have to credit this book for finally “connecting the dots” for me between the classroom engineering concepts I learned at CMU and the real world around me.

The War of Art by Steven Pressfield

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This was a quick but very influential read. Anyone who has tried to build, write, or create anything will appreciate Pressfield’s book, which basically boils down to how to recognize and conquer The Resistance, something we’ve all felt when doing something necessary but difficult.

Creative Confidence: Unleashing the Creative Potential Within Us All by Tom and David Kelley

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There aren’t many people more creative than the Kelley brothers, who helped found and lead IDEO, the world’s leading design consultancy. The biggest takeaway for me was that creativity is something we all possess. Some of us just lose confidence in our creativity while growing up. Perhaps we were told we can’t draw or that we were analytical or that we were athletes and so stopped exploring our “creative side”. I read this in tandem with Zen and the Art of Motorcycle Maintenance and found the two to be very much related. This book is the reason I decided to take my first acting class and then helped me find the confidence to think I could be decent at it.

The Alchemist by Paulo Coelho

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Can’t believe I didn’t read this book until this year. If you’ve had moments of doubt about your life’s direction (whether personal or professional), this book will literally feel as if it’s written for you. Read it.

Side note about Paulo Coelho: some people get put off by the religious (Christian) nature of his writing. Whether you consider yourself religious or not (I’m personally not religious at all), his writing is still inspirational and provides guidance with the existential questions of life.

What’s Mine Is Yours by Rachel Bostrom

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I’ve gotten really interested in the sharing economy this year (also known as the 1099 economy or the Uber economy) and this was the best book I found about the young industry. The book was written in 2010 (before the whole Uber craze really took off) so it’s amazing that so many of the predictions in here are spot on. Bostrom’s analysis and thinking around the whole space are great in terms of giving you a complete picture into the trends and forces causing “on-demand” and “sharing” services to explode in popularity today. The coolest takeaway from her analysis of the sharing economy: it’s really a move away from the unnatural “largeness” of 20th century corporations and a return to the more local economies of the past (and hopefully future).

If you’re interested in the sharing economy, you HAVE to read this book.

If On A Winter’s Night A Traveler by Italo Calvino

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Hands down the most creative book I read all year and possibly in my entire life. The book has 10 “first chapters” of stories intertwined with a love story involving…you! It sounds bizarre but it’s so engaging and I wasn’t able to put it down once I started.

The book was originally written in Italian (Italo Calvino was Italian, in case you couldn’t guess that from his name) and reading this really made me wonder what, if anything, was lost in translation. The English version is so great, I can’t even imagine how good the original was.

Zero To One by Peter Thiel

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Whether or not you’ve read the Blake Masters class notes from Thiel’s Stanford class, this is an interesting and important read. Regardless of if you agree with his politics, there are few people out there like Thiel and his contrarian thinking definitely gets you thinking outside the box. I personally don’t agree with 100% of his views but his thinking is presented in a readable, accessible manner that had (and still has) me looking at the world with a renewed desire to solve big, meaningful problems

Incerto Series by Nassim Nicholas Taleb

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Taleb is a genius, plain and simple. I wrote about his work earlier this year and his writing has been hugely influential in crystallizing my thoughts on risk. Just as importantly, his work is hilariously written and somehow manages to make 3 books about a “boring” topic like risk impossible to put down.

While I chose to feature The Black Swan, the other 2 books in the series are Fooled by Randomness and Antifragile. They can be read in any order but I would recommend starting with The Black Swan, then moving to Antifragile (my favorite in the series) and then finishing with Fooled by Randomness if you’re still interested.

Warning about Taleb: He’s EXTREMELY opinionated, which leads to some amazing and entertaining writing but can also piss some people off. If you read his books and end up falling into the pissed off group…can’t say I didn’t warn you.

World War Z by Max Brooks

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Directly related to Taleb’s work is World War Z. The zombie infection outbreak is a great, thankfully fictional, example of a Black Swan event. I also happened to read this around the time of the ebola breakout so that probably played a part in making this so memorable for me.

I was a huge fan of the movie too but the book is very different. The movie was told from one person’s point of view while the book is basically a series of recollections from various points in time during the outbreak and war, with no central character.

The Meditations by Marcus Aurelius and Letters from a Stoic by Seneca

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This year I got interested in learning more about Stoic philosophy. I’ve never been one to “sweat the small stuff” so Stoicism made intuitive sense from the beginning. The coolest thing to me was reading Meditations and literally seeing a Roman emperor struggle with the same things I do on a daily basis – namely, knowing that the world isn’t perfect and adapting my attitude to make sense of and operate in that world. Learning about Stoicism also played a big part in helping me come up with my morning routine.

 

So those were the top recommendations from my 2014 reading. If any of these books look interesting to you, definitely make the time to read them. Also, if you have a Goodreads account, let’s connect there.

I’m always on the lookout for more to read so definitely send your recommendations my way!

 

When Free Stuff Online Becomes Dangerous

Ask anyone if they want to get something valuable without giving up a single penny in return and they will definitely say “yes”. It’s a human trait – we really love free stuff.

On the Internet, we’ve gotten used to getting products and tools for free. There’s nothing inherently wrong with this. Some companies are using a freemium model where they give away part of their product for free to entice you to buy the full product. Game companies do this all the time as do companies like Dropbox. Other companies give away their product for free in an effort to build an audience and sell ads – Google, Facebook, and Twitter for example. Although the ads can get annoying sometimes, these are all perfectly acceptable business models.

Where things get more dangerous and scary is when tools that involve sensitive information, such as healthcare, personal finance, or security are given out completely free. I want to be clear here: I’m not talking about freemium or free updates. I’m talking about 100%, no strings attached, free.

Why is this dangerous? Because companies need to make money and the easiest way for these “free” products to do it is by selling your personal data. In its most innocent form, this simply involves lead generation – think Mint.com and all the credit card offers you receive through their site after making an account. At a more insidious level, personally identifying or user activity data could be sold to third parties.

Don’t believe me? StopDataMining.Me was featured in Lifehacker last year identifying 50 data brokers who store and re-sell your personal data to others. They all have ways to opt-out but let’s be honest: how many of us even know the names of all the companies reselling our data? Even worse, you have to opt-out from each site, one by one. The problem is so widespread that The Federal Trade Commission issued a report earlier this year recommending that Congress require data brokers be more transparent and give consumers greater control over their personal information. Not much has happened with that so far but the recommendation by the FTC is a step in the right direction.

At the individual level, there’s not much we can do about all this except be aware of it. I’m not saying we should stop using free tools. Just be sure to think through the business model of whatever tool you’re deciding to use. My one recommendation would be to opt for paid tools and services for things that involve sensitive data – the extra few dollars per month is worth it.